Judge: Stuart M. Rice, Case: 23STCV03401, Date: 2025-01-06 Tentative Ruling

Case Number: 23STCV03401    Hearing Date: January 6, 2025    Dept: 1

Party:   Plaintiffs Carolina Martinez and Jessica Rodriguez
Ruling:                        Motion to approve amended PAGA settlement granted.

Plaintiffs Carolina Martinez and Jessica Rodriguez (Plaintiffs) request approval of a Private Attorney General Act (PAGA) settlement between themselves and defendants Advantage Media Services, LLC (AMS) and Jay Catlin (collectively, Defendants).  Plaintiffs’ operative First Amended Complaint alleges claims for PAGA penalties arising from violations of Sections 200, 201, 202, 203, 226, 226.2, 226.3, 226.7, 512, 558, 1174, 1174.5, 1182.12, 1194, 1197, 1198, and 2802 of the Labor Code. 

Legal Standards

Under Labor Code section 2699(l)(2): “The superior court shall review and approve any settlement of any civil action filed pursuant to this part. The proposed settlement shall be submitted to the agency at the same time that it is submitted to the court.”  (Lab. Code. §2699(l)(2); see Williams v. Superior Court (2017) 3 Cal.5th 531, 549 [noting in passing that “PAGA settlements are subject to trial court review and approval, ensuring that any negotiated resolution is fair to those affected.”)  However, “[t]he standards for review [for court approval of a representative PAGA action settlement] are unclear, however, because the trial court does not have a fiduciary responsibility to any absent class members as it does in reviewing class action settlements.”  (The Rutter Group, Cal. Prac. Guide Civ. Proc. Before Trial, Ch. 14-D, ¶12:250; see also Haralson v. U.S. Aviation Services Corp. (N.D. Cal. 2019) 383 F.Supp.3d 959, 971 [“[N]either the California legislature, nor the California Supreme Court, nor the California Courts of Appeal, nor the [Labor and Workforce Development Agency (the “LWDA”)] has provided any definitive answer as to what the appropriate standard is for approval of a PAGA settlement.”].)  A court may exercise its discretion to approve a settlement of a suit that includes a PAGA claim even if no portion of the settlement is allocated toward payment to the LWDA. (See Nordstrom Com. Cases (2010) 186 Cal.App.4th 576, 589.)   

Given that California case authority on the issue is somewhat sparse, the Court looks to a federal district court case, Haralson v. U.S. Aviation Services Corp. (N.D. Cal. 2019) 383 F.Supp.3d 959, for guidance on court approval of PAGA settlements.  In Haralson, the court noted that the rationale behind the statute’s court approval requirement is that settlement of PAGA claims compromises a claim that could otherwise be brought by the state.  (See Haralson, supra, 383 F.Supp.3d at 971.)  The court noted that the LWDA has provided the following guidance:  “It is thus important that when a PAGA claim is settled, the relief provided for under the PAGA be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public and, in the context of a class action, the court evaluate whether the settlement meets the standards of being ‘fundamentally fair, reasonable, and adequate’ with reference to the public policies underlying the PAGA.  (Haralson, supra, 383 F.Supp.3d at 971.) 

The courts have also considered payment of civil penalties as a factor in approval of PAGA settlements.  (See Flores v. Starwood Hotels & Resorts Worldwide, Inc. (C.D. Cal. 2017) 253 F.Supp.3d 1074, 1077 [federal district court approved PAGA settlement where court was satisfied that the parties' settlement was “fair and adequate in view of the purposes and policies of the statute” and the parties “adequately divvied up the civil penalties under Section 2699(i) of the California Labor Code.”].)  However, payment of civil penalties is not dispositive.  (See Nordstrom Com. Cases, supra, at 589.)  

Background

This case was originally a class action.  On September 27, 2023, the Court granted Plaintiffs’ request for dismissal of their class and individual wage claims and “individual PAGA claims.”  On November 5, 2024, the Court denied Plaintiffs’ motion for approval of PAGA settlement without prejudice.  Plaintiffs’ counsel has filed a supplemental declaration addressing the issues with the settlement, which the Court will treat as a renewed motion for approval. 

Discussion

The proposed settlement is for a gross amount of $250,000, divided as follows:

Plaintiffs have corrected the arithmetical issue present in the initial motion.  The proposed division is in order and will be approved. 

1.      Notice to the LWDA

Labor Code section 2699(l)(2) requires that the settlement be provided to the Labor Workforce Development Agency (LWDA) at the same time it is presented to the court.  Plaintiffs provided notice to the LWDA of the amended settlement on December 2, 2024.  (Supplemental Solouki Decl., ¶ 10, Ex. F.) 

2.      Fairness of the Settlement

a.      Presumption of Fairness

Under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4^th 1794, a presumption of fairness exists where “(1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”  (Id. at 1802.) 

The settlement agrees to have been reached through arm’s-length bargaining.  The parties exchanged timekeeping, payroll, and workweek information during the PAGA period for both Plaintiffs and the other aggrieved employees and attended a full-day mediation with Hon. Jeffrey K. Winikow (ret.) on March 8, 2024.  (Initial Solouki Decl., ¶¶ 7-8.) There have been no objections received.  The settlement is presumptively fair.

b.      Breadth of Release

The release in the revised settlement agreement applicable to aggrieved employees reads:

All Aggrieved Employees are deemed to release, on behalf of themselves and their respective former and present representatives, agents, attorneys, heirs, administrators, successors, and assigns, the Released Parties from all claims for PAGA penalties that were alleged, or reasonably could have been alleged, based on the PAGA Period facts stated in the Operative Complaint, and the PAGA Notice.

(Solouki Decl., Ex. 1, ¶ 5.2.)

This release is appropriately narrow to include only claims under PAGA, and only those based on facts in the LWDA notice and the FAC, which bound the scope of this litigation. 

c.       Amount of Attorney Fees and Costs

The settlement provides for $82,500 in attorney fees, approximately one-third (33.33%) of the gross settlement amount.  This is appropriate considering the result achieved and the Court will approve it. 

Counsel request $14,655.31 out of a maximum of $17,000 in litigation costs.  These costs appear reasonably incurred and reasonable in amount, and the Court will approve them. 

The settlement allocates up to $5,350 for settlement administration costs to ILYM Group, Inc.  This is reasonable in amount and the Court will approve it. 

d.      Gross Settlement Amount

$20,000 of the gross amount is for individual settlements, making the true gross settlement amount applicable to PAGA $230,000.  This represents penalties for 39,631 pay periods worked by 518 employees.  This is a little more than $5.80 per pay period and approximately $444 per employee, prior to attorney fees and costs.  This appears a reasonable amount.

e.       Division of Civil Penalties

“[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the Labor and Workforce Development Agency for enforcement of labor laws, including the administration of this part, and for education of employers and employees about their rights and responsibilities under this code, to be continuously appropriated to supplement and not supplant the funding to the agency for those purposes; and 25 percent to the aggrieved employees.”  (Labor Code § 2699(i).)

The amount of civil penalties is properly divided between the LWDA and aggrieved employees as the law requires. 

f.        Funding of Settlement

Under the settlement, Defendants will fund the settlement within 14 days of the administrator’s finalization of aggrieved employee data, which will be roughly 30 days after the granting of the motion to approve.  (Supp. Solouki Decl., Ex. B, ¶¶ 4.2-4.3.)  Payments will be made to aggrieved employees and for other disbursements within 14 days after that.  (Id., ¶ 4.4.)  Uncashed checks will be canceled and the funds transmitted to the Unclaimed Property Fund of the State Controller in the name of the aggrieved employee payee.  These are all acceptable terms and will be approved.

g.      Service Awards and Individual Settlements

Plaintiffs each request a service award of $2,500, a total of $5,000.  These are reasonable in amount considering the length of this case and the work by Plaintiffs and will be approved.

Plaintiffs also request individual payments of $10,000 each for settlement of their individual claims.  As these are not actually settlements of PAGA claims, they do not require court approval and the Court is satisfied that no conflict exists.   

Conclusion

For the foregoing reasons, the motion is granted.  The Court will sign Plaintiffs’ amended proposed order.  Plaintiffs to give notice.